Executive Board member Isabel Schnabel said, in a speech, ECB’s negative interest rate policy has been successful in turning the “zero lower bound” into an “effective lower bound” well below zero. That “fundamentally improved monetary transmission and helped to stimulate the economy and raise inflation.
From Eurozone’s experience over the past few years, the positive effects of negative rate dominated, support by use of other policy measures. Nevertheless, she added, “side effects are likely to become more relevant over time”. She urged that “a forceful policy response by governments to the pandemic is indispensable for raising potential growth, thereby paving the way for positive interest rates in the future.”
